Page 1
Groupon Clones in Vietnam
Collective Buying via the Web
Tai Tran, updated 24.10.2011
Page 2
• 24.10.2011
– Slide 4, a few more sites
– Slide 26 - 31 on financial information
Updates
Page 3
Terminologies
• Idea from Groupon.com, a
portmanteau derived from
"group" and "coupon"
• Use Groupon logo as
repres...
Page 4
Page 5
Big 4 (updated July 2011)
Page 6
Traffic
Source: Google AdPlanner, composed by Phi http://twitter.com/p2045i/status/107757376874086400/photo/1
Page 7
• NhomMua.com
– Leader
– Free COD
– Heavy advertising
– Experience from industry investor (Rebate
Networks)
• Hotde...
Page 8
• Deal aggregators
Secondary sites
Page 9
• Underdeveloped e-payment market => high cost of
COD
• Lack of financial tricks e.g. trade credit, ACSOI
• Limited...
Page 10
• Acquired by Groupon.com or Living Social
Exit strategy
Page 11
The Groupon Business Model
Page 12
11/2008
•Launched in Chicago,
founder: Andrew Mason
•$1m seed investment
2010
•150 North American
markets, 100 EU-...
Page 13
• We provide mostly free web services
• We have large user communities
• How do we monetize the user base besides ...
Page 14
Page 15
Model
Ad on Site
Offer discount
if threshold
(min number of
buyers) is met
Discount
voucher
Merchants
Customer
(al...
Page 16
Win-Win-Win what?
Groupon Merchant Customer
Boons • Source of Revenue
• Low cost of building
a website (users
focu...
Page 17
Value proposition to merchants
Network of Subscribers
Access to
Network of
Subscribers
Vast
Distribution for
Promo...
Page 18
Industries Groupon focuses on
Restau-
rants
Fashion
Beauty Travel
• Small-value items
• New companies / new branch...
Page 19
Page 20
Categories
Page 21
• Merchants need to be
consulted on
– Number of vouchers
– Threshold
– Discount rate
– Duration of campaign
– Deal...
Page 22
Customers demographics
Early adopters
Likely
Facebook
user
Office
professional
Disposable
income
Urban
females
Page 23
• Groupon.com charges 50%
– Full-price service $40
– Discounted price $20
– Groupon retains 50% of $20
– Merchants...
Page 24
• COD: cash on delivery
– Customer places order, Groupon calls to confirm
– Groupon prints voucher
– Pay cash at c...
Page 25
Cost Management
• Underdeveloped e-Payment
industry
• Collecting payment, refund,
rebate is too costly
• For small...
Page 26
• Basically broke-even Q3 2011
• Free cash flow $60m in Q3 2011
• Sales growth slowed - a sign of profitability
• ...
Page 27
Page 28
Page 29
Vietnam 2010 (VND trillion)
F&B 19.3
Household
goods &
services
4.3
Transport
7
Hotels &
caring 4.4
Healthcare
3.7...
Page 30
-125%
-100%
-75%
-50%
-25%
0%
25%
50%
75%
100%
2009 First 3
quarters
2010
2010 First 3
quarters
2011
Per Revenue R...
Page 31
-53
590.49 495.46
-25
0
25
50
75
100
125
150
175
200
225
250
Market Cap ($b) P/E Share Price 24.10.11 Revenue most...
Page 32
Rivalry:
high
Threat of
new
entrant:
high
Buyer
power
(customer):
high
Substitute:
moderate
Supplier
power
(mercha...
Page 33
Comparisons
Page 34
• Groupon Store: self-serving store for merchant
• Groupon Now: what to buy today with Groupon,
location-based
New...
Page 35
International Expansion
CityDeal in
Europe
Darberry in
Russia
Qpod in
Japan
uBuyiBuy in
Hong Kong
SoSasta in
India...
Page 36
Future
Opportunities
• Young population, eager to try new
experience
• Post-crisis frugality
• Herd behavior
Value...
Page 37
Success drivers
Clear strategy
Strong
sale
team
Reduce
cost of
delivery
Backed
by
existing
comm-
unities
Quantitat...
Page 38
• A Harvard Business School research
– Merchants with discounts is more likely to be profitable
– Voucher services...
Page 39
• Eliason, Frezgi, Khan, 2010, 'Group Buying White Paper', Harvard
Business School, accessed from
http://www.slide...
Page 40
1. Blog http://taitran.vn
2. LinkedIn http://www.linkedin.com/in/taitran
3. Facebook http://www.facebook.com/taitr...
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Groupon Clones in Vietnam

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Groupon Clones in Vietnam

  1. 1. Page 1 Groupon Clones in Vietnam Collective Buying via the Web Tai Tran, updated 24.10.2011
  2. 2. Page 2 • 24.10.2011 – Slide 4, a few more sites – Slide 26 - 31 on financial information Updates
  3. 3. Page 3 Terminologies • Idea from Groupon.com, a portmanteau derived from "group" and "coupon" • Use Groupon logo as representative of Groupon & Groupon clones in Vietnam • Merchants in this research are usually retailers • CC: credit card • COD: cash on delivery • VP: pay & receive voucher in providers' office Disclaimer • Information from this slide is solicited from public sources only • The author does not benefit from promoting any service mentioned in this slide • This slide does not necessarily reflect the investment view of the author • This slide does not necessarily reflect the investment view of the organization where the author works • Disclosure: the author is not working at a venture capital firm
  4. 4. Page 4
  5. 5. Page 5 Big 4 (updated July 2011)
  6. 6. Page 6 Traffic Source: Google AdPlanner, composed by Phi http://twitter.com/p2045i/status/107757376874086400/photo/1
  7. 7. Page 7 • NhomMua.com – Leader – Free COD – Heavy advertising – Experience from industry investor (Rebate Networks) • Hotdeal.vn – Fast follower – Free COD – More mature segment • MuaChung.vn – Selective deals – Focus on menu sets => benefits for the restaurants – Educate user to use e-payment (VCCorp's SohaPay), intentionally charge COD – User base from VCCorp's sites • CungMua.com – Fast follower – Mid-end vendors – Efficiency – Launch inCard.vn • Zing Deal – (used to) promote Zing Xu (payment system), but was forced to offer free COD – User base from Zing's sites • KhuyenMaiVang.vn – Experienced sales force from 5giay • 51deal.vn – SMS code: buyer pay after using service => buy without painstaking research • Everyday.vn – BTA – Rebate unused vouchers after expiry dates • Others notable – CungMuaSam.net – NecDeal.com • Many other are declining: vndoan, runhau, supersale, phagia, muale… • Why hasn't PeaceSoft, VTC and FPT Online joined the hype? – My speculation: PeaceSoft wants to focus on its core business - eBay clone, and maybe it is too busy with integrating ChoDienTu to eBay and NganLuong to PayPal A few notable sites
  8. 8. Page 8 • Deal aggregators Secondary sites
  9. 9. Page 9 • Underdeveloped e-payment market => high cost of COD • Lack of financial tricks e.g. trade credit, ACSOI • Limited access to fund raising sources • Mapping, location-based and logistics are not fully utilized Limitations of clones in Vietnam
  10. 10. Page 10 • Acquired by Groupon.com or Living Social Exit strategy
  11. 11. Page 11 The Groupon Business Model
  12. 12. Page 12 11/2008 •Launched in Chicago, founder: Andrew Mason •$1m seed investment 2010 •150 North American markets, 100 EU-Asia- South America markets •35m users •Acquire global clones in EU, South America, Sing, Japan, Russia, Hongkong, Philippines, Taiwan, Malay •1500 employees 2011 •Turn down Google's $6b acquisition •File for IPO $11b •Break-even Q3 2011 •8000 employees, 4000 sales The original Groupon.com More of a Sales company than a technical product. Technology is NOT important Funding 1. Keywell $1m, 2007 2. New Enterprise Associates $6.8m, 2008 3. Accel $30m, 2009 4. Digital Sky Tech $135m, 2010
  13. 13. Page 13 • We provide mostly free web services • We have large user communities • How do we monetize the user base besides selling ad? Web service providers • We offer products / services • How do we market besides traditional marketing channels? Merchants • How do I discover good deals? • How to I explore good products & services? • How do I explore my connections' preference? Customers Demands
  14. 14. Page 14
  15. 15. Page 15 Model Ad on Site Offer discount if threshold (min number of buyers) is met Discount voucher Merchants Customer (also web users) • Payment • Pageview Customer Bring the voucher to Shop and redeem product/service Merchants • Offer product/service • Hope to retain the customers Revenue less Groupon fee Win-Win-Win for all 3 parties
  16. 16. Page 16 Win-Win-Win what? Groupon Merchant Customer Boons • Source of Revenue • Low cost of building a website (users focus on deals rather than user experience) • Share viral costs with users (users share the news among themselves via Facebook, chat) • Sell big lots • Flexible marketing channel • Revenue upfront • Some customers do not redeem the voucher before expiry => revenue without offering service. 25% vouchers are never redeemed ~ $1.2b (approximately $300m free cash for merchants) • Discounts • Explore preferences of connections Disadvant ages • High payment & delivery cost (next slides) • Drive down margin • Pay upfront Risks • Obscure pricing & service quality from merchants may hurt the reputation of the web provider • Can't handle the flood of voucher redeemers • No guarantee customers will come back after using the discount • Ambiguous pricing • Inconsistent service quality
  17. 17. Page 17 Value proposition to merchants Network of Subscribers Access to Network of Subscribers Vast Distribution for Promotion to Potential New and Return Customers Consumer Profile Targeted Deal Distribution and Access to Customer Demographics Assurance Contract to Deal Activation No Upfront Cost to Run Deal Develop Promotion and Editorial for Merchant No additional promotion cost to increase brand awareness Customer Service to Manage Deals Merchants can focus on servicing additional customers
  18. 18. Page 18 Industries Groupon focuses on Restau- rants Fashion Beauty Travel • Small-value items • New companies / new branches • High customer acquisition cost • Companies without full-pledged retail network • Low cost of goods sold (CoGS) • Travel & spa: flexible CoGS • Restaurants: meal set should be optimized so that buyers would order more • High-value items – e.g. iPad – For promotion campaigns – If offered as deal: attract huge amount of users – Given for free as promotion • Users give up personal information for a chance to win the item • Marketing for the site
  19. 19. Page 19
  20. 20. Page 20 Categories
  21. 21. Page 21 • Merchants need to be consulted on – Number of vouchers – Threshold – Discount rate – Duration of campaign – Deal design • Which items • Menu set Economics of merchant
  22. 22. Page 22 Customers demographics Early adopters Likely Facebook user Office professional Disposable income Urban females
  23. 23. Page 23 • Groupon.com charges 50% – Full-price service $40 – Discounted price $20 – Groupon retains 50% of $20 – Merchants receive $10 – Groupon.com charges lower fees for less prominent ad space • Most Groupon clones in Vietnam charge 15-30% Charges Full Price $40 Discounted Price $20 Merchant receive $14 Physical goods: fixed, CoGS, profit on large quantity Service: low CoS, can be profitable Groupon retains 30%, or $6 Selling cost Delivery cost Marketing cost Management cost
  24. 24. Page 24 • COD: cash on delivery – Customer places order, Groupon calls to confirm – Groupon prints voucher – Pay cash at customer's site – Groupon hires a logistics service – Some offer free delivery, some charge – 90% orders in Vietnam – High cost • Bank transfer through large banks • ATM, Internet Banking • e-Wallet: NganLuong, MobiVi, Payoo, baokim, Soha Pay • SMS: 51deal, phagia Payment
  25. 25. Page 25 Cost Management • Underdeveloped e-Payment industry • Collecting payment, refund, rebate is too costly • For smaller sites: if threshold (minimum number of buyers) is not met, the deal becomes invalid and cost incurs without revenue Business model sustainable? • Winner takes it all? – No – This is retail business. There is room for followers • Issues (criticism) – Positive cash flow vs. loss in income statement? – Ponzi scheme? • The current business model is too costly to sustain • Innovation is needed to further develop this model Money
  26. 26. Page 26 • Basically broke-even Q3 2011 • Free cash flow $60m in Q3 2011 • Sales growth slowed - a sign of profitability • Cutting marketing expense and acquisitions in Q3 2011 • IPO – Valuation $11.4b – Proceeds mostly likely to fund international acquisition and product development • "Media attention" is an intangible asset not reflected on the balance sheet Financial
  27. 27. Page 27
  28. 28. Page 28
  29. 29. Page 29 Vietnam 2010 (VND trillion) F&B 19.3 Household goods & services 4.3 Transport 7 Hotels & caring 4.4 Healthcare 3.7 Market Sizes
  30. 30. Page 30 -125% -100% -75% -50% -25% 0% 25% 50% 75% 100% 2009 First 3 quarters 2010 2010 First 3 quarters 2011 Per Revenue Ratios Marketing% SGA% Acquisition% Net profit% Brief Financial Analysis If Groupon further cut marketing expense by 35%, the company would immediately be profitable today. 0 5 10 15 20 25 30 35 40 45 50 55 60 7.5 8.5 9.510.511.512.513.514.5 PriceperShare MRP Sensitivity to market Key assumptions • Revenue 2011E 1.5b • The company retains break-even state in Q4 2011 • Risk-free rate = 10-year US government bond rate • Negative beta
  31. 31. Page 31 -53 590.49 495.46 -25 0 25 50 75 100 125 150 175 200 225 250 Market Cap ($b) P/E Share Price 24.10.11 Revenue most recent quarter ($b)
  32. 32. Page 32 Rivalry: high Threat of new entrant: high Buyer power (customer): high Substitute: moderate Supplier power (merchant): low • Cost to launch a new website is low • Focus on developing sales team • Existing users/communities from other sites in the same company: a requirement • Positive cash flow Numerous merchants Low switching cost Numerous deal hunters Low switching cost Five forces For customers: • Coupon books • Direct promotions For merchants: • Ad on Google (search engine) • Ad/coupon on Facebook (social media) • Direct promotions
  33. 33. Page 33 Comparisons
  34. 34. Page 34 • Groupon Store: self-serving store for merchant • Groupon Now: what to buy today with Groupon, location-based New Services
  35. 35. Page 35 International Expansion CityDeal in Europe Darberry in Russia Qpod in Japan uBuyiBuy in Hong Kong SoSasta in India Groupoer in South Africa Twangoo in Israel Gaopeng in China with partnership from Tencent
  36. 36. Page 36 Future Opportunities • Young population, eager to try new experience • Post-crisis frugality • Herd behavior Values brought to Vietnam • For the first time, e-commerce goes mass • Educate e-payment • Attract attention from users, media, investors 2011: educating market Market size $30m 2013: mature market Market size $100m
  37. 37. Page 37 Success drivers Clear strategy Strong sale team Reduce cost of delivery Backed by existing comm- unities Quantitatively consult merchants on logistics: optimal deal size, discount, maximum number of vouchers, duration
  38. 38. Page 38 • A Harvard Business School research – Merchants with discounts is more likely to be profitable – Voucher services grow: customers over-rely on vouchers Research result
  39. 39. Page 39 • Eliason, Frezgi, Khan, 2010, 'Group Buying White Paper', Harvard Business School, accessed from http://www.slideshare.net/HackStartups/group-buying-white-paper • Groupon S-1 Analysis http://www.slideshare.net/MartinNew/groupon-s1-analysis • Groupon Analysis http://www.slideshare.net/elissegaynor/groupon- analysis • Groupon filing to SEC http://sec.gov/Archives/edgar/data/1490281/000104746911008598/ a2205238zs-1a.htm • Groupon's IPO Roadshow http://www.businessinsider.com/groupon- ipo-roadshow-slides-2011-10?op=1 Reference
  40. 40. Page 40 1. Blog http://taitran.vn 2. LinkedIn http://www.linkedin.com/in/taitran 3. Facebook http://www.facebook.com/taitran 4. Google+ http://gplus.to/taitran 5. LinkHay Money http://www.linkhay.com/tien Tai Tran

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